Invest In Wrist Watches For Looks Not Value

During the last financial crisis the high-end watch market took a serious plunge. Luxuries such as the purchase of expensive watches tends to be one of the first things to go during rough economic times. The Swiss watch market is especially sensitive to economic depressions, and finds itself always having to aim where new money is. This is because high-end wrist watches for the most part are a poor economic investment. You should buy them because you love them, because they are beautiful, and because you want to wear them. Not because you think they will hold or increase in value.

As a professional talking head on watches I often get asked about investing in watches for profit. The idea that you’ll buy a watch and wait until it increases in value doesn’t made for good sense. Plus, historically it doesn’t happen often even with extremely rare watches. Of course this is not the universally the case, but if I was your investment adviser, I would say stick with watches for wearing not anticipating.

Let me address the two main “exceptions to the rule,” Rolex and Patek Philippe. For whatever reason these two powerful brands have been able to claim at least solid “value retention” for their products. This means that if you buy a new Rolex or Patek Philippe watch today, chances are you won’t lose much or any money if you sell it a few years from now. There is a healthy auction market for vintage Rolex and Patek Philippe watches. A few rare historic models do fetch very high prices at auction, but none of these are pieces anyone has purchased new anytime recently. The best you could say about making money off buying a new Rolex or Patek Philippe, is that if are able to acquire a very special or rare model today, your children or grandchildren might have a chance of making a healthy profit at auction in the distant future. Nevertheless, Rolex and Patek Philippe are extremely impressive brands do have success at auction because they have consistently remained quality brands for so long. If you look closely at watch auctions, you’ll also notice that most of the high yield pieces are simply re-circulated lots that show up in auctions each few years. Invest in one of these and you might make a slim margin if you resell it a few years later.

The majority of other watch brands lose a lot of value right after purchase. This means that people who buy new watches and decide to resell them even right after purchase are faced with the situation that they cannot sell them at prices at all close to retail much of the time. This fact alone is likely a major cause of watch industry problems during poor economic periods. Imagine you are someone that purchased a large quantity of watches when money was good. If your financial outlook sours, you are likely going to try and sell off assets such as watches. Faced with a reality that you cannot recoup much of your investment, you are likely to stop buy as much watches.

Why does this happen? An easy answer is that watch prices are too high. It is hard to discuss the matter of “too high” when it comes to luxury goods purchased for status and emotional reasons. It isn’t however hard to discuss price versus value when it comes to thinking about watches from an investment standpoint. Diamonds and gold for example have fluctuating prices set by the market. If you buy gold or diamonds you know that the price of purchase is more or less the value of sale. That isn’t the case with watches. Watch value is completely controlled by desirability and exclusivity, not the price that brands apply to price tags.

As a watch lover I am not at all suggesting you avoid buying watches. Quite the opposite, I want people to buy and enjoy watches with the same enthusiasm that I have. I merely want people to have more accurate expectations when it comes to value. Buy a watch because you are attracted to it for a visual, functional, or historical reason. In other words, buy a good watch for an emotional reason. If you are intent on getting as much value retention from your purchase as possible, here are a few tips. First, go with watches from brands that a lot of people know. Wide brand awareness tends to really increase resale demand. Next, get a watch with controlled distribution and consistent pricing. If the price of a watch you are interested is double in a store what it is on the internet, then it likely suffers from poor distribution and has well than consistent pricing. The more consistent a price is overall, the more consistent and high the resale value will be. Last, go with popular models that have been around for a long time. Brands like Rolex and Cartier have been selling versions of essentially the same watch families for decades. These product families have the benefit of years of demand, and typically benefit from much better resale values.